This article was co-authored by Jennifer Mueller, JD. Jennifer Mueller is an in-house legal expert at wikiHow. She received her JD from Indiana University Maurer School of Law in 2006.

There are 24 references cited in this article, which can be found at the bottom of the page.

Once you've patented an invention, you've got two options if you want to make money off of your invention without producing and marketing the product yourself. First, you could sell your patent – what the U.S. Patent and Trademark Office calls "assignment," because you assign your ownership rights in the patent to someone else. Your other option is to license to others the rights to do certain things, such as distribute or manufacture, your invention. Licensing isn't a full sale, even if the license is exclusive, because you are still the record owner of the patent.[1][2]

Steps

Method1

Selling Your Patent Outright

1

Analyze the market for your invention. Figure out how much investment you would have to make to sell your product to the public, and compare that to the profit you project the product will earn.

Selling your patent entirely to another company allows you to make a quick profit off of your idea, which you can use to recoup some of your research costs or even finance a new invention.[3]

You do want to keep in mind that when you assign your patent, you lose any right to future profits. Although chances are you won't realize any profits anyway for awhile, you risk losing out if you assign your product and then it becomes a big hit.[4]

Honestly assess your own strengths and weaknesses. If you have few business or marketing skills, it probably will be to your advantage to assign your patent to someone who is strong in those areas if you want to make any money off of your invention.[5]

Understand that manufacturing a product requires a lot of time, effort, and cash investment. If you don't have the resources available to produce and distribute your product, you could end up in the red for quite some time.[6]

2

Advertise that your patent is for sale. You can use online marketplaces and trade shows to reach potential buyers for your product.

You also can find manufacturers or distributors by looking at products similar to yours in stores or in magazines.

Online databases such as the Thomas Register enable you to search for companies that manufacture or distribute products like yours that might have interest.

Buy space for a product announcement in trade magazines or the USPTO gazette, and advertise that your patent is available for sale.[7]

3

Consider using an intermediary. You may benefit from using a broker or web service to market your patent to potential buyers, especially if you have few connections in the industry.

Brokers market your invention to manufacturers, typically taking a percentage of royalties for their services once the patent is sold.[8]

4

Make contact with potential buyers. Let interested parties know your asking price and the business projections you've made for the product.

Write targeted marketing letters to companies or representatives you think might be interested in your product and let them know you are interested in selling your patent.

5

Negotiate the terms of your patent assignment. Once you've decided which buyer you're going to go with, you can start negotiating the finer points of the agreement.

Although full assignments that transfer 100 percent of an ownership interest in a patent are common, you also can transfer only a portion of the ownership. For example, if a patent is owned by two people, one of those owners can assign 100 percent of his ownership interest to someone else. However, this ownership interest only represents 50 percent of the ownership interest in the patent as a whole.[9]

Assignments also can be partial.[10] For example, you could assign a quarter of your interest to a buyer, leaving you with three-quarters interest. You could sell those quarters to another buyer or keep them for yourself. The interest sold is up to the patent owner.

6

Draft your agreement. Write up the initial terms as negotiated and circulate it back to the buyer for comment.

You might consider hiring a patent attorney to draft a full assignment of your patent to ensure the agreement meets all federal law requirements. Additionally, some states have laws that require certain formalities be observed if you are selling or transferring patent rights.

All written documents relating to your patent should identify it by its number and the date the patent was issued, along with the name of the inventor and the official title of the invention. This is required by federal law and your assignment could be invalid if this information isn't included.[11]

You can find sample patent assignment agreements available online that you can adapt to suit your needs.[12][13]

7

Execute your patent assignment in front of a notary public. When you've come to a final agreement, meet with your buyer to sign the agreement before a notary.

8

Record the assignment with the USPTO. Your assignment must be recorded with the USPTO for it to take full effect. If you don't record an assignment within three months of its effective date, the patent can't be sold to anyone else.

There are two ways to record the assignment. Recording the assignment with the USPTO provides legal public notice of the assignment. Recording the assignment in the patent file allows the new owner to take action in any patent proceeding, such as filing a patent infringement suit.[14]

The USPTO requires all recorded assignment documents be written in English. If your assignment is written in another language it must be accompanied by an English translation signed by the translator.[15]

The assignment must be submitted together with a required cover sheet and a $40 fee to Mail Stop Assignment Recording Services, Director of the United States Patent and Trademark Office, P.O. Box 1450, Alexandria, VA 22313-1450.[16]

Don't send your originals to record with the USPTO, since they won't be returned.[17]

Make sure you fill out and include the official cover sheet required by the USPTO to accompany all assignment documents.[18]

Method2

Licensing Patent Rights

1

Decide what types of help you need to bring your product to the public. Licensing transfers less than a full ownership interest in your patent, and may be limited by time, geographical area, or field of use.[19]

For example, you may have the connections and ability to distribute your product in North America, but need assistance to sell it in Asia. You wouldn't have to sell your patent to grant someone an exclusive license to market and distribute your product in Asia.

Licensing typically will be the more profitable route over assignment, because you retain ownership and control over the patent itself.[20]

2

Advertise to potential licensees. You can use trade shows to let people in the industry know about your invention and present licensing opportunities.

For a fee, you can have a notice that your patent is available for license in the USPTO's official gazette.

Your invention has a better chance of taking off if you can license it to an established company that already has good brand recognition.[21]

3

Negotiate the terms of your deal. Make sure that the licensing deal is in your best interest and the limitations are advantageous to you before you go forward with the deal.

You might consider consulting either a patent attorney or a business advisor who can provide advice on whether the license agreement will benefit you.

You want to decide whether the license will be exclusive or non-exclusive. If it is exclusive, you are granting the licensee sole rights to take a particular action regarding your patented invention, usually only for a specific period of time or in a particular geographic area.

4

Draft your agreement. When you grant a patent license, you effectively agree that you won't sue the licensee for patent infringement as long as they operate within the agreed-upon limitations of the license.[22]

Unlike an assignment, no particular form is required for a license. The terms may consist of whatever you want and be styled however you wish.

Consider hiring an intellectual property to assist you with drafting your agreement. Licensing agreements can be complicated and you may forget to cover an important term that results in a significant loss to you.

Make sure you include provisions for advance payments, royalty percentages, and infringement issues. Since you remain the owner of the patent, your licensee needs to know that he can count on you to sue if an unauthorized third party infringes on his licensed territory.

Providing for yearly minimum payments, or requiring royalty percentages to escalate each year, is a contractual way to give the licensee incentive to market and distribute your product aggressively.[23]

Include the ability to have an accounting firm perform audits periodically to ensure you're receiving the royalties due to you under the licensing agreement.[24]

If you want to reserve your ability to practice certain patent rights, for example to make limited quantities of your product for research purposes, make sure that's carved out in writing in your licensing agreement.

5

Execute your agreement. Once you've agreed on the terms and conditions of the license, get together with your licensee and sign the agreement.

Unlike an assignment, a license doesn't have to be recorded with the USPTO since it doesn't transfer any ownership interest.

You have no protection until your patent is published, prior to approval. This is about one year after filing. Once published, you may notify an entity that you believe there is infringing activity. You must wait until the patent is granted before proceeding with any legal action. Once you have filled your patent, it will either be granted or not. You have a filing number and can legally claim patent pending when introducing your design or prototype.

To sell a patent, start by using online marketplaces and trade shows to advertise that your patent is for sale. Alternatively, sign on with a broker to market your patent, but be prepared to pay them a percentage of your royalties for their work. When potential buyers crop up, talk them through your asking price, along with any business projections for the patent. Then, once a buyer agrees to your price, negotiate and draft an agreement. After that, sign the agreement in front of a notary, and record it with the U.S. Patent and Trademark Office. For information from our Legal reviewer on how to license your patent rights, scroll down!

Did this summary help you?

Article Info

This article was co-authored by Jennifer Mueller, JD. Jennifer Mueller is an in-house legal expert at wikiHow. She received her JD from Indiana University Maurer School of Law in 2006.